Controversial digital currency Bitcoin is ready to celebrate a significant milestone tomorrow for any prodigy in the making. Its 10th birthday. It was reportedly on October 31, 2008, that anonymous tech wizard Satoshi Nakamoto published a paper on his plans for a finite digital currency that could rival everyday cash currently used by global citizens. It was reportedly back in January 2009 that bitcoin, the world’s first digital currency, was launched at a price of just a few cents, as few in the world took seriously back then the idea that a secretive internet currency could replace real-world money. The…

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Controversial digital currency Bitcoin is ready to celebrate a significant milestone tomorrow for any prodigy in the making. Its 10th birthday.

It was reportedly on October 31, 2008, that anonymous tech wizard Satoshi Nakamoto published a paper on his plans for a finite digital currency that could rival everyday cash currently used by global citizens.

It was reportedly back in January 2009 that bitcoin, the world’s first digital currency, was launched at a price of just a few cents, as few in the world took seriously back then the idea that a secretive internet currency could replace real-world money.

The bitcoin price has gone from just a few US cents in 2009 to US$6,359 this afternoon, with the price even climbing to around US$20,000 at the end of last year.

At the end of 2017 bitcoin’s gross value was more than US$300 billion, and although it has since fallen back to around US$100 billion it’s still more valuable than the likes of National Australia Bank Ltd(ASX: NAB) and Woolworths Group Ltd(ASX: WOW) combined.

Those two companies posted around A$7 billion in profits in financial year 2018, compared to Bitcoin that produces zero cash flow for its owners.

So why is Bitcoin so popular?

Buyers of Bitcoin and other digital currencies like Ripple, Ethereum, Litecoin, and Bitcoin Cash generally believe that real-world cash is vulnerable to the harmful effects of inflation even as central bank cash rates remain low.

Currencies like Bitcoin are also finite in number, which is unlike infinite real-world cash that is regularly created by the world’s banking systems.

This is important as crypto supporters believe the basic economics of supply and demand will eventually force the price of cryptos up as we saw briefly at the end of 2017.

For example today a Toyota Corolla car is worth more than a 20kg bag of rice.

However, if a global famine hit in 2019 a 20kg bag of rice could become more valuable than the car due to basic laws of supply and demand.

Crypto believers claim demand for the finite currencies could rocket as inflation or social unrest erodes the value of real-world currencies.

It’s also possible that crypto could one day be used to pay for everyday goods and services if the blockchain technology underpinning it is sufficiently developed.

Cryptocurrency is likely to divide the bulls and bears for a long time yet then and is likely to remain volatile even as early Bitcoin buyers celebrate its 10th birthday.

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Motley Fool contributor Yulia Mosaleva has no financial interest in any company mentioned. The Motley Fool Australia owns shares of National Australia Bank Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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